Current Focus of Vegetable Oil Market

Focus 1: Why can't I bring rapeseed oil with me?

Since 2019, rapeseed has experienced a significant reduction in inventory, and the road to rebuilding rapeseed inventory has not been smooth. The continuous dry heat has significantly reduced the excellent rate of Canadian rapeseed and significantly reduced the prospect of yield per unit area, offsetting the potential for yield improvement brought about by the increase in planting area.

The rapeseed balance sheet is facing further tightening. In a situation where initial inventory was already tight, Canadian rapeseed production significantly declined, and export and crushing potential had to be compressed to match the decrease in supply. Price increases became an important means of adjusting the new balance between supply and demand.

The global rapeseed balance is facing a tightening pattern on the surface.

High domestic vegetable oil inventory, low transaction volume, and deviant market atmosphere; The theme of vegetable oil is relatively limited, and there is insufficient sustained action; The policy risks between China and Canada are relatively high, and the enthusiasm for funds is sluggish.

But there are also some marginal changes happening. Enterprises have become accustomed to locking in imported goods several months in advance, and high profits in the early stage have led to a significant increase in the purchase of vegetable oil by ships. From January to June this year, domestic vegetable oil imports reached 1.44 million tons, an increase of nearly 60% from 820000 tons in the same period last year; The import of rapeseed was 1.25 million tons, a decrease of 8.5% from 1.48 million tons in the same period last year.

But as profits deteriorate, companies have reduced their purchases in the distant months, and there will be a significant reduction in future arrivals to the port. It is reported that in the coming months, rapeseed will arrive at the port on 3-4 ships per month, and rapeseed oil will be purchased on approximately 100000 tons per month, which should provide support for distant month rapeseed oil.

Focus 2: When can the pressure on domestic vegetable oil be relieved?

We expect the high inventory pressure of domestic rapeseed oil to be alleviated from October to November, in conjunction with a significant reduction in Canadian rapeseed and rapeseed oil supply, which will add value to the long position allocation of the rapeseed oil 01 contract.

Focus 3: How to repair the significant inverted profits?

Against the backdrop of a significant tightening of the Canadian rapeseed and rapeseed oil balance sheet, it is difficult to achieve profit recovery through a significant decline in overseas quotations. The rise in domestic prices is a highly probable event, but is the upward basis still the upward trend?

At present, vegetable oil is at an absolute high price of over 10000 yuan, and vegetable oil is facing a marginal weakening in the later stage. The momentum of the continuous upward trend in the market is limited, and it is expected that most of the profit recovery will be achieved through a basis increase.

Focus 4: What are the concerns of other vegetable oil markets?

The slow reconstruction of horse palm inventory supports the strength of vegetable oil.

Insufficient domestic procurement supports the export sales of American beans.

The USDA August report lowered the yield of American soybeans to 50, but with the current improvement in rainfall, there is limited room for further reduction in yield.

With the improvement of domestic soybean extraction profits and the shortage of ship purchases in the fourth quarter, new domestic purchases will support the mid-term export sales of US soybeans, maintaining a volatile and strong trend.

The Hope of the Whole Village - Sunflower Oil

The sunflower seed production for 2021/22 is expected to recover from last year's significant reduction. The increase of over 7 million tons, equivalent to nearly 3 million tons of sunflower oil, will help make up for the shortage of rapeseed and palm oil supply.

Summary and Strategy

Rapeseed has shown strong performance around reduced production trading, and it is expected that there will be further upward space in the future; The sluggish demand for domestic vegetable oil, high inventory in channels, and insufficient willingness to speculate on funds have significantly differentiated the internal and external trends of vegetable oil.

Profit inversion has significantly reduced the purchase of ships in the Far East, and it is expected that the high inventory pressure of domestic rapeseed oil will be alleviated from October to November. In conjunction with the significant reduction in Canadian rapeseed and rapeseed oil supply and the potential for export, the value of the long head configuration of rapeseed oil 01 can be given. It is possible to consider expanding the price difference between 15 sets of rapeseed oil and 01 beans.

Against the backdrop of a significant tightening of the Canadian rapeseed and rapeseed oil balance sheet, it is difficult to recover the significant inverted profits domestically through a significant decline in overseas quotations, and a rise in domestic prices is a highly probable event. However, the current vegetable oil prices are at an absolute high level, and vegetable oil is facing marginal weakening in the later stage. The momentum of the continuous upward trend in the market is limited, and it is expected that most of the profit recovery will be achieved through the basis increase.

In the medium term, US soybeans are supported by improved export sales, while poor production of horse palm restricts the speed of inventory reconstruction, providing support for rapeseed oil prices. However, the resumption of sunflower seed production in the 21/22 fiscal year will help fill the supply gap of rapeseed and palm oil, which will limit the overall upward space for vegetable oil.

The company adheres to the principle of social responsibility and the business strategy of "three reliance and three directions", that is, attracting customers through taste, retaining customers through quality, and developing customers through brand; To seek efficiency from scale, efficiency from management, and effectiveness from the team, we strive to explore new forms of security services and continuously expand new areas of security services. The company currently has a security team of nearly 1700 people, consisting of 5 senior security guards as the core, forming an efficient, high-quality, standardized, and professional management and service team. The company has a security headquarters in Dunkou, a marketing center in Hanjie, and four branch offices. There are 8 security brigades under the headquarters, and 1 inspection team and 1 special service team have been established. At the same time, an alarm monitoring center and an intelligent security center have been established to provide comprehensive services such as security guards, patrols, guardianship, security checks, regional order maintenance, safety assessment, security planning, large-scale security, alarm monitoring, intelligent security, front-end etiquette, property management, etc. for more than 100 clients in Hubei Province, including domestic and foreign institutions, groups, financial departments, foreign-funded enterprises, office buildings, hotels, entertainment venues, residential communities, SOHO, etc., making an indelible contribution to maintaining social order stability and showcasing the security style of the new era.